‘Dividend Income’ are the buzz words well known to catch the attention of investors as the terms in general capacity relate to earnings distribution allocated to shareholders in the form of cash. In equities parlance, the distributions made typically through dividends hold great significance for investors; but sometimes dividend income goes underappreciated by the investors who fail to realize that over time, dividends constitute a major portion of their gains from the underlying profits or earnings of a company.
Additionally, during the low interest rate regime, yield offered by the dividend paying companies generally tends to be higher when compared with various other fixed income securities.
With an attempt to focus on the Dividend Aristocrats from various sectors that have juicy yields, Kalkine brings a ‘Dividend Income Report’ to inform the investors about the companies that believe in consistently rewarding their shareholders through distributions. Our strategy for this product category would be channeled towards cherry picking the companies that have sound dividend paying history or are laying the foundation for paying dividends consistently in the future for helping investors derive good value.
Looking through this, Dividend Income report of a stock would be pillared through certain criteria that will entail:
1. A wholistic view of the quality of dividend paid by the company along with possible tracking of growth rate of the dividends over a course of time. This will also touch upon an appropriate scheme of aspects that may support dividends while the market is witnessing signs of volatility.
2. History of Dividends – This is reflective of the time since when a company starts rewarding its shareholders and will take into account the consistency in maintaining the dividends. In this regard, companies that tend to deviate from historical trends and demonstrate variance between dividends paid every year may not always serve to be fit for purpose.
3. The report would also educate the investor about the frequency at which the distribution is announced by the company – Quarterly, Interim and annual.
4. Franking becomes an important aspect while evaluating the companies based on dividend income. Franking credits till now have eliminated the impact of double taxation on the dividends and provide extra incentive to the shareholders who fall in the low tax bracket.
Key examples in the category will include stocks to the likes of Blue-chips including Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Limited (ASX: TLS), and even small-cap stocks like Thorney Opportunities Ltd (ASX: TOP) and WAM Research Limited (ASX: WAX).